THE PROPERTY DEVELOPMENT REVIEW
Knight Frank Australia National Head of Capital Markets Justin Bond commented: “With interest rates expected to remain elevated globally into the second half of 2024, we anticipate private capital to remain active. “Indeed, during previous times of dislocation, private capital has typically rotated back into commercial real estate. “In Australia, we also see interest from institutional capital from Singapore, Japan and some parts of Europe, with the expectation of increased transactional activity in the latter part of 2024.” Cross-border commercial real estate investment flows Australia came in 7th for cross border commercial real estate investment flows in 2023, with US$5.7 billion invested amongst all investors, behind the US (US$29.6 billion), the UK (US$20.3 billion), Canada (US$9.7 billion), Germany (US$9.6 billion), Japan (US$8.7 billion) and the Chinese Mainland (US$6 billion).
“Private investors have positioned themselves for a recovery in the commercial property market, which we believe will start to emerge in Australia later this year. “The outlook is improving, with sentiment picking up off the back of the reduction in funding costs since October, hopes for interest rate cuts later in the year and gradual erosion of bid-ask spreads. This will see the level of activity grow and the investor base normalise as the year goes on, but this process will take time and private investors will continue to take significant market share.” The most sought-after sectors in commercial real estate Globally industrial and logistics were the most invested sector in commercial real estate for the first time on record in 2022, taking a quarter of all global investment at US$174 billion, according to Knight Frank’s The Wealth Report 2024. While industrial and logistics, retail, hotel and senior housing and care all increased their share of total global investment in 2023, the office market fell from 25% in 2022 to 22% in 2023, and the living sector share contracted from 30% to 24%. All sectors recorded an annual decline in total investment in 2023, with senior housing and care (-28%) seeing the smallest decline. However, the story was slightly different for private buyers in 2023. Globally, living sectors were the most targeted by private capital, followed by industrial and logistics, and offices. Looking ahead, Knight Frank’s The Wealth Report 2024 Attitudes Survey found that 19% of respondents were looking to invest directly in commercial real estate in 2024, with investors from the Middle East (23%) and Asia (21%) likely to be the most active. However, investor preferences are shifting and for the first time in four years, a new sector has topped the investor wish list. The living sectors are the most in demand in 2024, with 14% of respondents looking to target the asset class. Interest is strongest in Europe, the Middle East, North America and Asia. News Release
News Release
Melbourne and Sydney ranked 9th and 10th respectively for total cross border investment in 2023, with US$2.2 billion and US$2.1 billion invested. Canada (US$9.7 billion), Germany (US$9.6 billion), Japan (US$8.7 billion) and the Chinese Mainland (US$6 billion). Melbourne and Sydney ranked 9 th and 10 th respectively for total cross border investment in 2023, with US$2.2 billion and US$2.1 billion invested.
Data source: Based on Knight Frank’s analysis of RCA data and Knight Frank’s Attitudes Survey
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Data source: The above is based on Knight Frank’s analysis of RCA data and Knight Frank’s Attitudes Survey
Definitions
*Private investors: Companies whose control is in private hands and whose business is primarily geared towards operating, developing or investing in commercial real estate. Attitudes Survey: The 2024 instalment is based on responses provided during December 2023 by more than 600 private bankers, wealth advisers, intermediaries and family offices who between them manage over US$3 trillion of wealth for UHNWI clients. For further information, please contact: Vanessa De Groot – Marketing & Communications, Knight Frank Vanessa.degroot@au.knightfrank.com +61 410 460211
*Private investors : Companies whose control is in private hands and whose business is primarily geared towards operating, developing or investing in commercial real estate.
Healthcare is not far behind, attracting 13% of respondents. However, intentions do not necessarily equate to transactions, due to factors including availability of stock, market size and competition. Looking ahead, Knight Frank’s The Wealth Report 2024 Attitudes Survey found that 19% of respondents were looking to invest directly in commercial real estate in 2024, with investors from the Middle East (23%) and Asia (21%) likely to be the most active. However, investor preferences are shifting and for the first time in four years, a new sector has topped the investor wish list. The living sectors are the most in demand in 2024, with 14% of respondents looking to target the asset class. Interest is strongest in Europe, the Middle East, North America and Asia. Healthcare is not far behind, attracting 13% of respondents. However, intentions do not necessarily equate to transactions, due to factors including availability of stock, market size and competition. Knight Frank Australia National Head of Capital Markets Justin Bond commented : “ With interest rates expected to remain elevated globally into the second half of 2024, we anticipate private capital to remain active.
April / May 2024 – 13
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